Iron Ore-Shanghai rebar bounces off 1-mth low, gains seen shaky

Reuters Staff

4 Min Read

* China services sector expands again in March-HSBC
* Slow return by Chinese into spot iron ore market
(Updates rebar price, adds Port Hedland)
By Manolo Serapio Jr
SINGAPORE, April 5 (Reuters) - Shanghai steel rebar futures
rebounded after hitting one-month lows on Thursday, tracking
gains in equities, after upbeat services sector data on China
encouraged buyers returning from a three-day break.
The gains in steel prices, unless sustained, were unlikely
to prompt Chinese mills to stock up again on raw material iron
ore, where buying interest in the spot market has largely
stalled, traders and analysts said.
The most active October rebar contract on the Shanghai
Futures Exchange rose 0.7 percent to close at 4,354 yuan
($690) a tonne by 0731 GMT, after falling as low as 4,291 yuan
earlier.
"I don't think steel prices will go up too much because the
weak fundamentals are intact - there's oversupply, and end-user
demand will not be strong enough to absorb this supply," said
Henry Liu, head of commodity research at Mirae Asset Securities
in Hong Kong.
The gains came after a 1.7 percent jump in Shanghai shares
, led by non-banking financials after Premier Wen Jiabao
said the monopoly formed by the country's big banks needed to be
broken to get money flowing to cash-starved private
firms.
China's services sector expanded again in March as business
confidence hit an 11-month high, according to a survey of
private firms by HSBC.
The seasonally adjusted HSBC Services Purchasing Managers
Index stood at 53.3 last month, down slightly from February's
53.9, but signalling healthy growth with the new business
sub-index extending an unbroken run of expansion to 40 months.
SKEPTICISM
Chinese steel mills have been quick to responds to any signs
or expectations of a pickup in demand, lifting daily crude steel
output to 1.919 million tonnes in mid-March, the highest average
so far this year.
But largely steady steel prices since the start of the year
reflect slow consumption growth that has tempered Chinese
appetite for iron ore.
It was a slow return by the Chinese into the spot iron ore
market on Thursday, with very few bids seen and cargoes also
thin, traders said.
"Most people are just getting back from holiday and checking
the market situation," said a Shanghai-based trader.
Sellers of imported iron ore in China left offer prices
where they were before the long holiday weekend, with Australian
61.5-percent grade Pilbara fines offered up to $148 a tonne,
cost and freight, and Indian 63.5/63-grade at $149-$151,
according to industry consultancy Umetal.
Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI held steady at $147.60 a tonne, based on data
from Steel Index, near the five-month high of $147.70 reached
last week.
The next upside target is $150 a tonne, brokerage INTL
FCStone said in a note, adding "there is considerable skepticism
as to whether the upward trajectory will last given concerns
about slowing Chinese growth."
Iron ore shipments to China through Australia's Port Hedland
were down modestly to 14.0 million tonnes in March from 14.58
million tonnes in February, according to port authority data, in
part reflecting weather-related disruptions to shipping.
Shanghai rebar futures and iron ore indexes at 0731 GMT
Contract Last Change Pct Change
SHANGHAI REBAR* 4354 30.00 0.69
PLATTS 62 PCT INDEX 149.75 0.00 0.00
THE STEEL INDEX 62 PCT INDEX 147.6 0.00 0.00
METAL BULLETIN INDEX 147.37 0.00 0.00
*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day
($1 = 6.2980 Chinese yuan)
(Editing by Daniel Magnowski)